Market Volatility A Positive For D.A. Davidson's Price Target On CyberArk Software

The risk/reward for Cyberark Software Ltd CYBR remains balanced, D.A. Davidson's Jack Andrews said in a report. He reiterated a Neutral rating on CyberArk Software, while raising the price target from $42 to $51, saying that the recent market volatility had impacted the valuation framework for the company.

Analyst Jack Andrews enumerated two factors for the upward revision of the price target:

1. The recent decline in the market risk free rate
2. A decline in the beta used for “a comparable set of companies”

Related Link: CyberArk's Top-Line Growth Could Outpace The Market, Says Barclays

Numerous Positives

Andrews mentioned three positives for the company:

• CyberArk Software offers investors “a rare combination of growth and profits,” the analyst wrote, adding that the company is expected to sustain over 20 percent revenue growth with operating margins of more than 20 percent over the next several quarters.
• The market opportunity for privileged access management appears strong.
• Feedback on the strength of CyberArk Software’s product offerings continues to be very positive.

Near Term Concerns

The analyst noted three factors to look out for in the near term:

• “First, we remain wary of the optics around likely decelerating growth (from an extraordinarily high rate), which may result in a diminishing “magnitude of beats” surrounding the company’s upcoming earnings reports,” Andrews commented.
• About 10 percent of CyberArk Software revenue had exposure to the British pound, which had depreciated by more than 10 percent on Brexit concerns.
• About one third of the company’s revenue comes from the financial services sector, “where we believe IT spending continues to be under increased scrutiny,” the D.A. Davidson report added.